5 Things Investors Should Know About Singapore Telecommunications Limited Before Buying Its Shares
Singapore Telecommunications Limited (SGX: Z74) or Singtel, is one of the three main telcos in Singapore. At current price of S$3.08 (as of the time of writing), Singtel’s share price has declined by around 20% from the highest point of S$3.80 for the past 52 weeks. Given the fall in share price, investors might be interested in investing in the company now.
If you are one of those investors, here are five things that you should know about the company before investing in it. I discussed the first three things in an article here, which are:
1) Financial track record
2) Latest earning update
3) Return on invested capital
In this article, I will continue with the last two aspects.
One of the main sources of investment income for investors is the profit paid out by the company in the form of dividends. Here, investors would seek companies that have demonstrated a stable track record of consistent or better still, growing dividends over a long period of time.
As for Singtel, it has grown its annual dividend from 16.8 cents per share in FY2013 to 17.5 cents in FY2018. Including the special dividend per share of three cents, the total dividend for FY2018 would be 20.5 cents.
Another important thing to note here is that the company expects to “maintain its ordinary dividends of 17.5 cents per share for the next two financial years and thereafter, will revert to the payout of between 60% and 75% of underlying net profit”. As such, investors will have the certainty of receiving a fixed 17.5 cents dividend per share for the next two years.
The final thing that investors should consider before investing in Singtel is its valuation.
At the share price of S$3.08, Singtel is trading at price-to-book (PB) ratio, price-to-earnings (PE) ratio and dividend yield of 1.7 times, 15.7 times and 5.7% respectively.
Comparatively, the market average’s PB ratio, PE ratio and dividend yield stood at 1.1 times, 10.5 times and 3.1%, respectively. Here, I’m using SPDR STI ETF (SGX: ES3) as a proxy for the market; the SPDR STI ETF is an exchange – traded fund that tracks the fundamentals of Singapore’s stock market benchmark, the Straits Times Index (SGX: ^STI).
We can see that Singtel is trading at a premium to the market average based on PB and PE ratios. Yet, it is also paying an above average dividend yield at its current share price.